As the Black Lives Matter Movement continues, a spotlight still shines on the considerable wealth gap in the US alongside legacy discriminatory practices in the financial services industry. Now, a new cohort of Fintechs has emerged from the movement with the goal of accelerating progress and delivering change for Black and Latinx Americans.
In a recent report from McKinsey, titled “A lack of financial inclusion for black Americans exists at every level of the financial system. Understanding the sources of exclusion is the first step to fixing the system” the study looked at how a lack of access to services is a direct cause of the massive racial wealth gap in America and stressed the importance of all Americans’ ability to save, invest, and insure themselves against risks. Due to many legacy issues, each is a key area where black Americans traditionally struggle.
In recent months, major financial services companies and large corporations such as Bank of America and Netflix have gotten kudos for making large deposits into black-owned banks and credit unions, despite the short shelf-life of two years or less. A new breed of Fintech platforms is targeting minority communities to accelerate progress and address several legacy issues, particularly in financial services, that have stood as barriers to change.
According to ‘How the Other Half Banks‘ by Mehrsa Baradaran, a University of California Law Professor and Banking Expert, “The United States has been called out for maintaining two separate banking systems, one serving the well-to-do and the other exploiting everyone else.” As a result, in minority neighbourhoods, we see an abundance of payday loan brokers offering access to instant cash at an annual interest rate of up to 499% and check cashing stores in place of bank branches. The trickle-down effects include a lack of financial education and awareness of options amongst younger generations, especially as the wealth gap continues to widen.
A new cohort of Fintechs has launched to tackle many of the social issues that have plagued Black and Latinx Americans for generations. CHIP, which stands for Changing How Individuals Prosper, provides access to Black and Latinx financial professionals and two new neobanks Tenth, billed as an “unapologetically black” digital neobank focused on enabling customers to ‘get financial freedom on your own terms,’ and Greenwood designed to offer ‘modern banking for the culture.’
CHIP is a platform designed to makes it easy to find Black and Latinx financial professionals. Founded Dana L. Wilson is a New York City-based investment advisor who has worked on Wall Street and at firms including Merrill Lynch, State Farm, and SunTrust Bank. She has a unique understanding of the finance industry and the challenges it faces to be more inclusive. With CHIP, people of colour can easily locate a financial professional who understands their circumstances and needs.
“I felt that CHIP was extremely important not just for the industry as far as visibility but then also allowing the end-user, if that person happens to be a person of colour, letting them know that we are here and we do exist, and I think that sometimes in corporate, and even in the independent space that I’m in, we don’t see a lot of that,” says Dana L. Wilson.
Tenth, named for W.E.B. DuBois’ book The Talented Tenth, which argued for using the best “negro” minds to educate and lead the Black community for the general uplift of all, is gearing up for launch. The company is on a mission to eradicate the wealth gap for Black and Latinx America. It’s co-founded by Donald Hawkins, founder of Griffin Technologies, and Asya Bradley, who has previously worked at fintechs SilaMoney, Socure, and Synapse.
Planning for a fourth-quarter launch, Tenth is inviting users to join their ‘movement.’ The company promises an app that lets users set savings goals, track expenses, get financial education, and access insurance, wealth management, and other services via a marketplace. Users can also support historically black colleges and universities via a roundup feature.
Greenwood, named to pay homage to the prosperous “Black Wall Street,” part of the Greenwood District of Tulsa, Oklahoma, during the early 20th Century. It was a center of Black enterprise, entertainment, skills, wealth, and investment capital. Though it was destroyed by white mobs in 1921, the Greenwood District remains an enduring symbol of the economic potential of community solidarity.
Founded by former Andrew Young, former U.S. Ambassador to the United Nations and former Mayor of Atlanta, and rapper Killer Mike, Greenwood recently raised $3 million in seed financing and received over 100,000 signups within 5 days of announcing the launch of the company.
“Lack of fairness in the financial system has a long and sordid history in our country,” says Michael ‘Killer Mike’ Render. “It is heartening to see so many people respond to a banking concept that seeks to increase the circulation of dollars in Black and Latinx communities, thereby increasing opportunities for wealth creation for these families and the entire economy.”
Greenwood’s initial products are savings and spending accounts that come with a black metal debit card for customers who sign up by the end of the year. Additional features like Apple, Samsung, and Google Pay, virtual debit cards, peer-to-peer transfers, mobile check deposits, and free ATM usage in over 30,000 locations will be offered with no hidden fees. Customers who invite their friends to open accounts receive cash awards as a thank you from Greenwood.
The company also has a focus on community. For every customer sign-up, Greenwood will provide five meals to a family in need. Every swipe of a Greenwood debit card will prompt a donation to UNCF for education, Goodr to feed the hungry, or the NAACP to support civil rights. Additionally, every month, Greenwood will provide a $10,000 grant to a Black or Latinx small business owner that is a Greenwood customer. Killer Mike hopes Greenwood will eventually grow from a banking platform into a fully chartered bank with the ability to fully serve the Black and Latinx community.
With younger generations continue to play a greater role in the economy, purpose and values have come to the forefront. Millennials and Gen Z have made it clear that they seek companies who align their principals with their performance, and overall believe business should be a force for good in society. These beliefs could pave the way for a new approach to financial services in the future, led by CHIP, Tenth, and Greenwood, and others, with change being delivered through the private sector.